First Premier Bank of South Dakota, U.S.A., is now offering a credit card with an interest rate of 79.9% p.a.

Yes, you read that correctly. New U.S. regulations, partially in effect now and hitting fully in the new year, severely limit the amount of money banks can earn through fees, which has long been the preferred method of squeezing cardholders with poor credit ratings. A typical ploy would be to offer a credit card with a $500 credit limit, then charge $515 worth of fees in the first year the account is open.

But the new regulations prohibit charging fees that are more than 25% of the credit limit. So these shady banks, some of which exist merely to operate such sham cards, are now seeking new methods of bilking the subprime credit card market.

First Premier’s CEO, Miles Beacom, defended the card in a printed statement, claiming the mind-boggling interest rate is no different from the higher premiums paid by poor drivers after a wreck or two. He added that the interest rate would drop “significantly” after a bit for cardholders with good payment records.

“We need to price our product based on the risk associated with this market,” said Mr. Beacom, “and allow the customer to make the decision whether they want the product or not.”

Federal lawmakers in Washington, D.C., are already discussing whether interest rates should have been included in the new regulations, which were intended to stamp out this sort of predatory lending, and whether they need to return to the regulatory drawing board.

Source: ecanadanow.com